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THIS CHAPTER WILL HELP YOU UNDERSTAND:
LO 1 Why it is critical for company managers to have a clear
strategic vision of where a company needs to head and why.
LO 2 The importance of setting both strategic and financial
objectives.
LO 3 Why the strategic initiatives taken at various organizational
levels must be tightly coordinated to achieve companywide
performance targets.
LO 4 What a company must do to achieve operating excellence
and to execute its strategy proficiently.
LO 5 The role and responsibility of a company’s board of directors
in overseeing the strategic management process.
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WHAT DOES THE STRATEGY-MAKING,
STRATEGY-EXECUTING PROCESS ENTAIL?
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FIGURE 2.1 The Strategy-Making, Strategy-Executing Process
Strategy Strategy
Making Execution
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STRATEGIC MANAGEMENT PRINCIPLE
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STAGE 1: DEVELOPING A STRATEGIC VISION,
A MISSION STATEMENT, AND A SET
OF CORE VALUES
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STRATEGIC MANAGEMENT PRINCIPLE
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TABLE 2.1 Wording a Vision Statement—the Dos and Don’ts
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ILLUSTRATION Examples of Strategic Visions—
CAPSULE 2.1 How Well Do They Measure Up?
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ILLUSTRATION Examples of Strategic Visions—
CAPSULE 2.1 How Well Do They Measure Up?
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ILLUSTRATION Examples of Strategic Visions—
CAPSULE 2.1 How Well Do They Measure Up?
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ILLUSTRATION Examples of Strategic Visions—
CAPSULE 2.1 How Well Do They Measure Up?
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COMMUNICATING THE STRATEGIC VISION
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STRATEGIC MANAGEMENT PRINCIPLE
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PUTTING THE STRATEGIC VISION IN PLACE
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WHY A SOUND, WELL-COMMUNICATED
STRATEGIC VISION MATTERS
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DEVELOPING A COMPANY MISSION STATEMENT
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STRATEGIC MANAGEMENT PRINCIPLE
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THE IDEAL MISSION STATEMENT
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LINKING THE VISION AND MISSION
WITH CORE VALUES
Core Values
● Are the beliefs, traits, and behavioral norms that
employees are expected to display in conducting the
firm’s business and in pursuing its strategic vision
and mission.
● Become an integral part of the firm’s culture and what
makes it tick when strongly espoused and supported
by top management.
● Matched with the firm’s vision, mission, and strategy
contribute to the firm’s business success.
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CORE CONCEPT
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ILLUSTRATION Patagonia, Inc.:
CAPSULE 2.2 A Values-Driven Company
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ILLUSTRATION Patagonia, Inc.:
CAPSULE 2.2 A Values-Driven Company
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STAGE 2: SETTING OBJECTIVES
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CONVERTING THE VISION AND MISSION
INTO SPECIFIC PERFORMANCE TARGETS
Specific
Characteristics
Quantifiable Challenging
of Well-Stated
(Measurable) (Motivating)
Objectives
Deadline for
Achievement
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CORE CONCEPT
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CORE CONCEPT
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CHARACTERISTICS OF STRATEGIC INTENT
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THE IMPERATIVE OF SETTING
STRETCH OBJECTIVES
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THE NEED FOR SHORT-TERM AND
LONG-TERM OBJECTIVES
Short-Term Objectives:
● Focus attention on quarterly and annual performance
improvements to satisfy near-term shareholder
expectations.
Long-Term Objectives:
● Force consideration of what to do now to achieve
optimal long-term performance.
● Stand as a barrier to an undue focus on short-term
results.
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CORE CONCEPTS
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WHAT KINDS OF OBJECTIVES TO SET
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SETTING FINANCIAL OBJECTIVES
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SETTING STRATEGIC OBJECTIVES
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CORE CONCEPT
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THE NEED FOR A BALANCED APPROACH
TO OBJECTIVE SETTING
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GOOD STRATEGIC PERFORMANCE IS THE KEY
TO BETTER FINANCIAL PERFORMANCE
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ILLUSTRATION
CAPSULE 2.3
Examples of Company Objectives
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STAGE 3: CRAFTING A STRATEGY
Strategy Making:
● Addresses a series of strategic how’s.
● Requires choosing among strategic
alternatives.
● Promotes actions to do things differently from
competitors rather than running with the herd.
● Is a collaborative team effort that involves
managers in various positions at all
organizational levels.
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STRATEGY MAKING INVOLVES MANAGERS
AT ALL ORGANIZATIONAL LEVELS
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STRATEGIC MANAGEMENT PRINCIPLE
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WHY IS STRATEGY-MAKING OFTEN
A COLLABORATIVE PROCESS?
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A FIRM’S STRATEGY-MAKING HIERARCHY
Two-Way Influence
Two-Way Influence
Two-Way Influence
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Orchestrated by Corporate Strategy
FIGURE 2.2 the CEO and (for the set of businesses as a whole)
• How to gain advantage from managing a set In the case of a
A Company’s other senior
single-business
executives of businesses
Strategy- company, these
Making two levels of the
strategy-making
Hierarchy hierarchy merge
Two-Way Influence
into one level—
Business
strategy—that is
Orchestrated by the senior executives Business Strategy orchestrated by
of each line of business, often with (one for each business the firm has diversified into) the company's
advice from the heads of functional • How to gain and sustain a competitive advantage CEO and other
areas within the business and other for a single line of business top executives.
key people.
Two-Way Influence
Two-Way Influence
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CORE CONCEPTS
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UNITING THE STRATEGY-MAKING HIERARCHY
Corporate-level
Business-level
Functional-level
Operational-level
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STRATEGIC MANAGEMENT PRINCIPLE
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A STRATEGIC VISION + OBJECTIVES +
STRATEGY = A STRATEGIC PLAN
Elements of a Firm’s
Strategic Plan
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STAGE 4: EXECUTING THE STRATEGY
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MANAGING THE STRATEGY EXECUTION
PROCESS (CONT’D)
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STAGE 5: EVALUATING PERFORMANCE AND
INITIATING CORRECTIVE AJUSTMENTS
Evaluating Performance:
● Deciding whether the enterprise is passing the three
tests of a winning strategy—good fit, competitive
advantage, strong performance.
Initiating Corrective Adjustments:
● Deciding whether to continue or change the firm’s
vision and mission, objectives, strategy, and/or
strategy execution methods.
● Based on organizational learning.
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STRATEGIC MANAGEMENT PRINCIPLE
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THE ROLE OF THE BOARD OF DIRECTORS
IN CORPORATE GOVERNANCE
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ACHIEVING EFFECTIVE
CORPORATE GOVERNANCE
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ILLUSTRATION Corporate Governance Failures
CAPSULE 2.4 at Fannie Mae and Freddie Mac